Oil Prices Drop 4% as Hopes Rise for U.S.-Iran Deal

Oil prices fell more than 4 percent early Wednesday as traders bet on progress toward a U.S.-Iran agreement that could extend the current ceasefire and ease restrictions at the Strait of Hormuz. Both benchmarks remained below $100 for a third straight session.

Traders said hopes for a framework deal outweighed concerns about falling global inventories and the continued closure of the Strait of Hormuz. ING commodities strategists Warren Patterson and Ewa Manthey wrote that prices were under pressure from improved sentiment around a potential agreement.

The American Petroleum Institute is scheduled to release inventory data later Wednesday, followed by the weekly government petroleum report on Thursday.

On Tuesday, Iran accused the United States of a grave violation of the ceasefire after new U.S. strikes on missile sites and boats in southern Iran. U.S. Central Command described the strikes as self-defense. U.S. Secretary of State Marco Rubio said an agreement remained possible, though President Donald Trump has stated he will accept only what he considers a good deal.

Traders have largely set aside those fundamentals while focusing on the possibility of renewed negotiations. The same ING note added that military activity persists near the strait, including U.S. strikes and reported Iranian engagement.